Correlation Between Methode Electronics and EnBW Energie
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and EnBW Energie at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Methode Electronics and EnBW Energie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and EnBW Energie Baden Wrttemberg, you can compare the effects of market volatilities on Methode Electronics and EnBW Energie and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Methode Electronics with a short position of EnBW Energie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and EnBW Energie.
Diversification Opportunities for Methode Electronics and EnBW Energie
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Methode and EnBW is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and EnBW Energie Baden Wrttemberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnBW Energie Baden and Methode Electronics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Methode Electronics are associated (or correlated) with EnBW Energie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnBW Energie Baden has no effect on the direction of Methode Electronics i.e., Methode Electronics and EnBW Energie go up and down completely randomly.
Pair Corralation between Methode Electronics and EnBW Energie
Assuming the 90 days trading horizon Methode Electronics is expected to generate 2.83 times more return on investment than EnBW Energie. However, Methode Electronics is 2.83 times more volatile than EnBW Energie Baden Wrttemberg. It trades about 0.31 of its potential returns per unit of risk. EnBW Energie Baden Wrttemberg is currently generating about -0.25 per unit of risk. If you would invest 815.00 in Methode Electronics on September 5, 2024 and sell it today you would earn a total of 235.00 from holding Methode Electronics or generate 28.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Methode Electronics vs. EnBW Energie Baden Wrttemberg
Performance |
| Timeline |
| Methode Electronics |
| EnBW Energie Baden |
Methode Electronics and EnBW Energie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and EnBW Energie
The main advantage of trading using opposite Methode Electronics and EnBW Energie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, EnBW Energie can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EnBW Energie will offset losses from the drop in EnBW Energie's long position.The idea behind Methode Electronics and EnBW Energie Baden Wrttemberg pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| EnBW Energie vs. ELECTRONIC ARTS | EnBW Energie vs. Fair Isaac Corp | EnBW Energie vs. Methode Electronics | EnBW Energie vs. UMC Electronics Co |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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